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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ottoman | LSE:OTM | London | Ordinary Share | GB00B0PJ6V42 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMOTM
RNS Number : 2147Q
Ottoman Fund Limited (The)
26 February 2016
THE OTTOMAN FUND LIMITED (the "Company")
Final results for the year ended 31 August 2015
The Company is pleased to announce as follows its final results for the year ended 31 August 2015 together with the publication of its 2015 annual report and accounts, a full copy of which will shortly be available on the Company's website: www.theottomanfund.com.
Enquiries:
N+1 Singer James Maxwell 0207 496 3000 Vistra Fund Services Limited Company Secretary 01534 504 700
Chairman's Statement
Dear Shareholders,
On 25 February 2016 we announced a distribution of 2p per share or GBP2.7m in total. This figure primarily represents cash proceeds from the Riva and Bodrum sales, which the Company recovered from its Turkish subsidiaries' bank accounts following the resolution of a lengthy process with Garanti Bank.
Following the payment of this distribution, the Group's principal assets will comprise Jersey bank balances of approximately GBP3.9 million, a loan to Mandalina that could be satisfied by the approximately GBP1 million that we believe Mandalina holds in a Turkish bank account, and a claim against the Company's former chief financial officer for approximately GBP1 million. In the Group's financial statements, the Mandalina loan balance and the claim against the former CFO have been fully provided against, which reflects the uncertainty over their ultimate collection. The Company currently has collection proceedings underway against both Mandalina and the Company's former CFO to recover these amounts. The Company's potential liabilities following the distribution could total GBP1.65 million and may include possible Turkish tax liabilities and third party claims. Any future distributions will be contingent on the Company's progress in resolving the Group's tax liabilities, prevailing in the collection proceedings that are now pending, exchange rate movements, and concluding the various legal cases now pending in Turkey. For now it is premature to offer a view as to the likely outcome of these various matters.
Over the past year we have continued our efforts to recover the money embezzled from the Group. We are working with a Turkish criminal lawyer and the local prosecutor's office in Istanbul to commence criminal proceedings against the Company's former CFO, and I will be traveling to Turkey in the next several weeks to give evidence. We are also taking the steps necessary to conclude the Group's affairs so the Company's net assets can be distributed to shareholders and the Company can then be placed in voluntary liquidation. These steps include determining the Group's tax liabilities and if necessary resolving opportunistic litigation that has been brought against the Company's Turkish subsidiaries and affiliates.
The resolution of these matters depends on complex Turkish legal, accounting and tax matters that must be addressed before the Company is placed in liquidation. We have been working within the Turkish legal system for about fifteen months and our impression is that the Turkish legal system is not designed to deal efficiently with private business disputes or even to punish a clear case of embezzlement. There are no barriers to filing meritless lawsuits. There is no mechanism for summarily dismissing a meritless lawsuit. There are no barriers to filing meritless appeals. There is no real cost shifting from a losing party to a prevailing one. There is no mechanism for the posting of security. Nonetheless, we are working closely with our Turkish accountants and tax advisors, the Istanbul office of BDO, and our Turkish lawyers, the Istanbul office of the law firm White & Case LLP, to resolve these outstanding issues.
Over the next several weeks, we will be sending a circular to shareholders seeking to extend the life of the Company so we can continue our efforts to recover Company's assets and make further distributions to shareholders. The alternative would be to hand the Company over to a liquidator now. Under this scenario, the Board would resign and the shareholders would lose any say in how the liquidator goes about his activities. The liquidator rather than the Board would have to resolve the issues identified above before any distributions would be made. The liquidation process would be non-transparent, costs would likely be higher, the liquidator's powers would not give him the flexibility the directors have to act commercially, and there would be no incentives to resolve things earlier rather than later. Given these facts and likelihoods, it is the Board's view that extending the life of the Company gives the best prospect for additional cash distributions.
I might further point out that in seeking to extend the Company's life, recover money embezzled from the Group, recover funds that remain in Turkey, and defend the Group against various bogus lawsuits underway, we weigh the choices we have against the costs that likely will be incurred, the amount of time that will likely be required, and the uncertainty of any outcome.
Very truly yours,
John D. Chapman
Chairman
The Ottoman Fund Limited
25 February 2016
Directors' Report
The Directors submit their Report and the audited consolidated financial statements (the "Financial Statements") of The Ottoman Fund Limited (the "Company") and its subsidiaries (together, the "Group") for the year ended 31 August 2015. The Company was formed on 9 December 2005 and commenced trading on its admission to the AIM market on 28 December 2005. The Company is quoted on the AIM market of the London Stock Exchange.
Principal Activity
The Company was established to invest in Turkish property. During 2014 the Company sold its remaining property interests. The Company's remaining assets are substantially cash balances. In addition, the Company has proceeded with legal actions in Turkey to recover remaining monies taken without authorisation by the former Chief Financial Officer, totalling $1.35m and to recover a loan to Mandalina of EUR1.3m. There is no certainty as to the recoverability of these amounts.
Investment Policy
Upon Admission to AIM, the Company's strategy was to invest in new-build residential developments in major cities and coastal locations in Turkey, aimed at both the local and tourist markets with an emphasis on off-plan sales. The Company now intends to make no new investments, having sold all investments previously held.
Results and Dividends
It is not intended in normal circumstances that the Company will pay dividends on the shares.
The Directors do not recommend the payment of a dividend for the year ended 31 August 2015 (2014: nil). The consolidated statement of comprehensive income is set out on page 9 of this Annual Report and consolidated Financial Statements.
The Group is involved in ongoing litigation in relation to events from the current and prior years. Details of the ongoing matters have been disclosed in notes 20 and 21.
Auditor
Baker Tilly Channel Islands Limited were appointed during the year and have expressed their willingness to continue in office. A resolution for their re-appointment will be considered at the next Annual General Meeting ("AGM").
Life
Under the Company's articles, as soon as practicable after 28 December 2015 the Directors are required to convene an Extraordinary General Meeting ("EGM") to consider a resolution to wind up the Company. The Directors will shortly be convening an EGM and expect to be recommending to shareholders that, in lieu of commencing a winding up at this stage, the articles are amended to extend the life of the Company, which the Directors believe is the most appropriate way to facilitate the best conclusion to the ongoing matters referred to in notes 20 and 21.
Manager & Custodian
Subsequent to the removal of Development Capital Management (Jersey) Limited as manager of the Company in 2010, management was internalised at the Board level and the Board engaged with Civitas Property Partners S.A. to manage and sell the Company's Turkish assets.
Subsequent to the termination of the custody agreement with BNP Paribas (Jersey branch) in 2010, the Company has not appointed a replacement.
Board of Directors
The Directors of the Company are listed on page 27. John D Chapman (Executive Chairman), Antony Gardner-Hillman and Andrew Wignall all served as Directors throughout the year. Eitan Milgram served as a Director from the beginning of the year up until his resignation on 4 August 2015.
Shareholders' Interests (as at 31 August 2015)
Size of shareholding (in shares) No. of shareholders 1 - 9,999 31 10,000 - 99,999 11 100,000 - 999,999 7 1,000,000 - 9,999,999 9 10m+ 3
At 31 August 2015 the Company was aware of the following interests of 3% or more in the ordinary share capital of the Company:
Hot Features
Premium
Number % held
QVT Financial LP 43,335,000 32.16%
Weiss Asset Management LLC 40,132,000 29.78%
Toscafund Asset Management LLP 22,551,098 16.73%
Lars Bader 7,940,000 5.89%
JPMorgan Securities CREST transition account 7,113,766 5.28%
The Directors are not aware of other interests of 3% or more in the Company's issued share capital.
Directors' Interests
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The maximum aggregate amount of ordinary remuneration payable to the Directors permitted under the Articles is GBP150,000 per annum. The Directors received in aggregate GBP150,000 for the year ended 31 August 2015 (2014: GBP150,000). Commencing 13 March 2009 John D. Chapman has been employed under an executive service contract that provides for an annual fee of GBP75,000 and a discretionary performance fee. In addition to the above, Andrew Wignall was remunerated GBP25,000 and Antony Gardner-Hillman was remunerated GBP18,400 for additional services provided to the Group in connection with the ongoing matters in Turkey concerning the recovery of remaining monies taken without authorisation by the former Chief Financial Officer.
None of the directors have any interests in the Company's share capital. Eitan Milgram is an Executive Vice President of Weiss Asset Management LLC, which owns a shareholding of 29.78% in the Company at the end of this financial period. As noted above, Eitan Milgram resigned as a director of the Company on 4 August 2015.
Andrew Wignall
Director
The Ottoman Fund Limited
25 February 2016
Statement of Directors' Responsibilities
The Directors are responsible for preparing the consolidated financial statements in accordance with applicable law and International Financial Reporting Standards.
The Companies (Jersey) Law 1991 requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that year. In preparing those financial statements, the Directors are required to:
-- select suitable accounting policies and apply them consistently; -- make judgments and estimates that are reasonable and prudent;
-- prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business; and
-- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.
The Directors confirm that they have complied with the above requirements in preparing the financial statements.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy, at any time, the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and hence for taking reasonable steps to prevent and detect fraud and other irregularities.
So far as the Directors are aware, there is no relevant audit information of which the Group's auditors are unaware, and each Director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the Group's auditors are aware of that information.
By Order of the Board
Vistra Secretaries Limited
Secretary
25 February 2016
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF THE OTTOMAN FUND LIMITED
We have audited the consolidated financial statements of The Ottoman Fund Limited (the "company" and together with its subsidiaries is referred to as the "Group") for the year ended 31 August 2015, which comprise the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows, and related notes. The financial framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union.
This report is made solely to the company's members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991, as amended. Our audit work is undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the Directors and Auditor
As explained more fully in the Statement of Directors' Responsibilities on page 6, the Directors are responsible for the preparation of the consolidated financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the consolidated financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APBs) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition we read the other information contained in the annual report and consider whether it is consistent with the audited financial statements. If we become aware of any apparent misstatements or material inconsistencies with the financial statements, we consider the implications for our report. Our responsibilities do not extend to any other information.
Opinion on the financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Group's affairs as at 31 August 2015 and of its loss for the year then ended;
-- have been properly prepared in accordance with IFRS as adopted by the European Union; and
-- have been prepared in accordance with the requirements of the Companies (Jersey) Law, 1991 as amended.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF THE OTTOMAN FUND LIMITED (CONTINUED)
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:
-- proper accounting records have not been kept; or
-- proper returns adequate for our audit have not been received from branches not visited by us; or
-- the financial statements are not in agreement with the accounting records and returns.
Ewan John Spraggon
For and on Behalf of Baker Tilly Channel Islands Limited
Chartered Accountants
St Helier, Jersey
25 February 2016
Consolidated Statement of Comprehensive Income
For the year ended 31 August 2015
Year ended Year ended
31 August 31 August
2015 2014
notes GBP GBP
Revenue
Proceeds from sale of inventory - 75,749,146
Less cost of inventory sold - (68,856,547)
----------- -----------
2(c) 6,892,599
Write back of inventory impairment - 6,151,756
Foreign exchange loss on sale of inventory - (23,075,220)
----------- -----------
- (10,030,865)
Finance income 2(c) 152,581 598,820
Total revenue 152,581 (9,432,045)
Operating expenses
Management/advisory fee 4 (108,844) (1,105,409)
Other operating expenses 5 (1,249,170) (574,124)
Loan impairment 8 (973,069) -
Total operating expenses (2,331,083) (1,679,533)
Foreign exchange gains 9 2,455,587 192,263
Gain/(loss) before tax 277,085 (10,919,315)
Tax charge 6 (2,606,868) (301,276)
Loss for the year (2,329,783) (11,220,591)
----------- -----------
Other comprehensive income:
Foreign exchange loss on subsidiary translation (1,159,163) (1,055,578)
Other comprehensive loss for the year (1,159,163) (1,055,578)
----------- -----------
Total comprehensive loss for the year (3,488,946) (12,276,169)
----------- -----------
Loss attributable to:
Equity shareholders of the Company (2,329,783) (11,220,591)
Minority interests -
----------- -----------
(2,329,783) (11,220,591)
----------- -----------
Total comprehensive loss attributable to:
Equity shareholders of the Company (3,488,946) (12,276,158)
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Minority interests - (11)
----------- -----------
(3,488,946) (12,276,169)
----------- -----------
Basic and diluted loss per share (pence) 7(b) (1.73) (8.33)
All items in the above statement derive from continuing operations.
The accompanying notes on pages 13 to 26 are an integral part of the financial statements.
Consolidated Statement of Financial Position
As at 31 August 2015
As at 31 As at 31
August 2015 August 2014
notes GBP GBP
Assets
Non-current assets
Loans and receivables 8 - 1,933,733
------------ ------------
- 1,933,733
Current assets
Trade and other receivables 11 212,499 1,227,634
Cash and cash equivalents 16 7,160,639 37,902,728
------------ ------------
7,373,138 39,130,362
Total assets 7,373,138 41,064,095
------------ ------------
Liabilities
Current liabilities
Trade and other payables 12 (1,642,756) (88,003)
(1,642,756) (88,003)
Net assets 5,730,382 40,976,092
------------ ------------
Equity
Share capital 13 52,636,216 84,392,980
Retained earnings 14 (43,954,508) (41,624,725)
Translation reserve (2,951,326) (1,792,163)
------------ ------------
Equity attributable to shareholders of the parent 5,730,382 40,976,092
Minority interests' equity - -
------------ ------------
Total equity 5,730,382 40,976,092
------------ ------------
Net asset value per ordinary share (pence) 15 4.3 30.4
The accompanying notes on pages 13 to 26 are an integral part of the financial statements.
These financial statements were approved by the Board on 25 February 2016.
Antony Gardner-Hillman Andrew Wignall
Director Director
Consolidated Statement of
Changes in Equity
Share Retained Translation Minority
capital earnings reserve interest Total
GBP GBP GBP GBP GBP
For the year ended
31 August 2015
As at 1 September
2014 84,392,980 (41,624,725) (1,792,163) - 40,976,092
Return of capital (31,756,764) - - - (31,756,764)
Loss for the year - (2,329,783) - - (2,329,783)
Foreign exchange
loss on
subsidiary translation - - (1,159,163) - (1,159,163)
At 31 August 2015 52,636,216 (43,954,508) (2,951,326) - 5,730,382
-------------- ------------ ----------- -------- -----------
For the year ended
31 August 2014
As at 1 September
2013 120,003,007 (30,404,134) (736,596) 11 88,862,288
Return of capital (35,610,027) - - - (35,610,027)
Loss for the year - (11,220,591) - - (11,220,591)
Foreign exchange
loss on
subsidiary translation - - (1,055,567) (11) (1,055,578)
At 31 August 2014 84,392,980 (41,624,725) (1,792,163) - 40,976,092
-------------- ------------ ----------- -------- -----------
The accompanying notes on pages 13 to 26 are an integral part of the financial statements.
Consolidated Statement of Cash Flows
notes Year ended Year ended
31 August 31 August
2015 2014
GBP GBP
Cash flow from operating activities
Loss (2,329,783) (11,220,591)
Adjustments for:
Finance income (152,581) (598,820)
Tax 2,606,868 301,276
Depreciation - 3,462
Amortisation - 774
Write back of inventory - (6,151,756)
Impairment of loan 8 973,069 -
Profit on sale of inventory - (6,892,599)
1,097,573 (24,558,254)
Net foreign exchange (gains)/ losses (1,083,913) 22,183,405
Decrease/(increase) in trade and other receivables 1,015,135 (550,913)
Increase/(decrease) in trade and other payables 1,554,753 (10,474)
Net cash inflow/(outflow) from operating activities before interest,
depreciation, amortisation
and tax 2,583,548 (2,936,236)
Finance income received 152,581 598,820
Tax (2,606,868) (301,276)
Net cash inflow/(outflow) from operating activities 129,261 (2,638,692)
Cash flow from investing activities
Purchase of inventories - (39,389)
Proceeds on sale of inventories - 72,597,621
Repayment of loan 8 885,414 826,220
----------- -----------
Net cash inflow from investing activities 885,414 73,384,452
Cash flow from financing activities
Return of Capital 13 (31,756,764) (35,610,027)
----------- -----------
Net cash outflow from financing activities (31,756,764) (35,610,027)
Net (decrease)/increase in cash and cash equivalents (30,742,089) 35,135,733
Cash and cash equivalents at start of the year 37,902,728 2,766,951
Effect of foreign exchange rates - 44
----------- -----------
Cash and cash equivalents at end of the year 7,160,639 37,902,728
----------- -----------
The accompanying notes on pages 13 to 26 are an integral part of the financial statements.
Notes to the consolidated financial statements
1. General information
The Ottoman Fund Limited had invested in Turkish land and new-build residential property in Riva, Bodrum and Alanya. The Group has as at the year end sold its investments. The Company is a limited liability company incorporated and domiciled in Jersey, Channel Islands since 9 December 2005. The Company is quoted on the AIM market of the London Stock Exchange plc. These consolidated financial statements have been approved by the Board on 25 February 2016.
2. Accounting policies
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The consolidated financial statements of the Group for the year ended 31 August 2015 comprise the Company and its subsidiaries, listed in note 10, (together, the "Group") and have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") as applicable in the European Union and interpretations issued by the International Financial Reporting Committee of the IASB ("IFRIC").
These policies have been consistently applied in all years presented, unless otherwise stated.
No new standards or amendments to standards were issued which were relevant to the Group and applicable for the year under review.
(a) Basis of preparation & going concern
The consolidated financial statements have been prepared on a historical cost basis.
The Company has sufficient funds to remain in operation for the foreseeable future. However the shareholders are due to vote on extending the Company's life. See "Life" paragraph in the Directors' Report. The directors have assumed that the Company's life will be extended and accordingly have prepared these financial statements on the going concern assumption.
(b) Basis of consolidation
Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 August each year. The consolidated financial statements are prepared using uniform accounting policies for like transactions. Control of an entity exists when the Company directly or indirectly controls a majority of the voting rights in that entity or has the ability to appoint or remove the majority of its board of directors. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences up to the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Minority interests represent the portion of profit and net assets not held by the Group. They are presented in the consolidated statement of comprehensive income and in the consolidated statement of financial position separately from the amounts attributable to the owners of the parent.
(c) Revenue recognition
Interest receivable on fixed interest securities is recognised using the effective interest method. Interest on short term deposits, expenses and interest payable are treated on an accruals basis. Revenue from sales of inventory is recognised when the significant risks and rewards of an asset have been transferred. The gains or losses from sale of inventory are recognised at the book gain or loss amount with any foreign exchange gains or losses being reflected separately in the statement of comprehensive income.
(d) Expenses
All expenses are charged through the statement of comprehensive income in the period in which the services or goods are provided to the Group except for expenses which are incidental to the disposal of an investment which are deducted from the disposal proceeds of the investment.
(e) Non current assets
General
Assets are recognised and derecognised at the trade date on acquisition and disposal respectively. Proceeds will be measured at fair value which will be regarded as the proceeds of sale less any transaction costs.
Loans and receivables
Loans and receivables are recognised on an amortised cost basis. Where they are denominated in a foreign currency they are translated at the prevailing balance sheet exchange rate. Any foreign exchange difference is recognised through the statement of comprehensive income.
Loans are reviewed for impairment by the Board on a semi-annual basis; any impairment is recognised through the statement of comprehensive income.
(f) Cash and cash equivalents
Cash and cash equivalents are classified as loans and receivables and comprise deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.
(g) Taxation
Profits arising in the Company for the 2015 year of assessment and future periods will be subject to tax at the rate of 0% (2014: 0%). However, withholding tax may be payable on repatriation of assets and income to the Company in Jersey. The Company pays an International Services Entity fee and neither charges nor pays Goods and Services Tax. This fee is currently GBP200 (2014: GBP200) per annum for each Jersey registered company within the Group.
The subsidiaries will be liable for Turkish corporation tax at a rate of 20%. Additionally, a land sale and purchase fee may arise when land is sold or purchased and a dividend tax of 15% may arise on certain distributions from the subsidiaries.
Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted.
(h) Foreign currency
In these financial statements, the results and financial position of the Group are expressed in Pound Sterling, which is the Group's presentational currency. The functional currency of the Company and Jersey subsidiaries is Pound Sterling; the functional currency for the Turkish subsidiaries is Turkish Lira.
The results and financial position of the entities based in Jersey are recorded in Pound Sterling, which is the functional currency of these entities. In these entities, transactions in currencies other than sterling are recorded at the rates of exchange prevailing on the dates of the transactions. Monetary balances (including loans) and non-monetary balances that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date.
The results and financial position of the entities based in Turkey are recorded in Turkish Lira, which is the functional currency of these entities. In order to translate the results and financial position of these entities into the presentation currency (Pounds Sterling):
- non-monetary assets (including inventory) are translated at the rates of exchange prevailing on the dates of the transactions ("historical translated cost");
- monetary balances (including loans) are translated at the rates prevailing on the balance sheet date; and
- items to be included in the statement of comprehensive income are translated at the average exchange rates for the year unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions.
Foreign exchange gains or losses are recorded in either the statement of comprehensive income or in the statement of changes in equity depending on their nature and how they have been derived. Exchange gains/losses on the translation of subsidiaries balances are accounted for in the translation reserve.
(i) Share capital
Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are shown as a deduction to reserves. Any redemption of shares is deducted from ordinary share capital with any transaction costs taken to the statement of comprehensive income.
(j) Critical accounting estimates and assumptions
The Board makes estimates and assumptions concerning the future in the preparation of the financial statements. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates, assumptions and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.
The Directors' have assessed the recoverability of the loan receivable from Mandalina Yapi
Insaat Sanayi ve Ticaret Anonim Sirketi ("Mandalina"), the results of which are disclosed in note 8.
In addition to the above, the Directors have made assessments with regard to contingent liabilities and an assessment of the matter discovered during 2014 in relation to the financial impact of the amount of funds that have been removed from the Group's Turkish entities (and entities affiliated with the Group) without authorisation. Please refer to notes 20 and 21.
(k) Changes in accounting policy and disclosures
New and amended standards adopted by the group
There are no IFRSs or IFRIC interpretations that are effective for the first time for this financial year that would be expected to have a material impact on the Group.
New standards, amendments and interpretations issued but not effective and not early adopted
At the date of the authorisation of these consolidated financial statements, the following statements, standards and interpretations were in issue but not yet effective for periods commencing on or after 1 January 2015 and have not been early adopted:
IFRS 9, 'Financial instruments' - classification and measurement' (effective 1 January 2015)
The full impact of the adoption of these standards and interpretations in future periods on the financial statements of the Group is still being assessed by the Directors.
3. Segment reporting
The chief operating decision maker (the "CODM") in relation to the Group is considered to be the Board itself. The factor used to identify the Group's reportable segments is geographical area.
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Based on the above and a review of information provided to the Board, it has been concluded that the Group is currently organised into one reportable segment: Turkey.
Within the above segment, the remaining significant asset at the year end date was cash. The CODM considers on a regular basis the repatriation of money from Turkey to Jersey.
4. Management/advisory fee
2015 2014
GBP GBP
Management fee 108,844 1,105,409
------- ---------
Civitas was appointed as Investment Advisor to the Group on 2 December 2009. The advisory fee structure was incentive-based with an annual fixed component of EUR212,500, and an incentive component based on a percentage of realisation value. It was agreed that the fee for the current financial year would be based upon a percentage of the realised sales value of the Alanya apartments. In the prior year, Civitas was paid GBP179,717 in relation to the fixed component. The incentive fee paid for the prior year was GBP925,692 which included commissions received on the sale of inventory being either 1% or 2% depending on the asset sold.
5. Other operating expenses
2015 2014
GBP GBP
Legal and professional fees 763,418 59,440
Advisory and consultancy fees 52,507 97,038
Marketing - 5,336
Travel and subsistence 31,632 7,513
Directors' remuneration 150,000 150,000
Administration fees 96,318 70,000
Audit services 37,006 60,734
Depreciation - 3,462
Amortisation - 774
Other operating expenses 118,289 119,827
--------- -------
1,249,170 574,124
--------- -------
The Group has one employee in Turkey, the costs for whom are included in the amounts above.
6. Tax 2015 2014
GBP GBP
Overseas tax - Turkey 2,606,868 301,276
--------- -------
This above represents taxation on profits earned by the Turkish subsidiaries, and therefore no tax reconciliation is deemed necessary. The increase in tax compared to the prior year is partly due to the outstanding amounts payable in relation to the funds removed from the Group's Turkish entities without authorisation during the period.
Refer to note 2(g) for further information.
7. Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the gain attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.
2015 2014
(Loss)/gain attributable to equity holders of the Company (GBP2,329,783) (GBP11,220,591)
--------------- ----------------
Weighted average number of ordinary shares in issue 134,764,709 134,764,709
--------------- ----------------
(b) Diluted
The diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. As the options expired without exercise, the basic and diluted earnings per share are the same.
Both the basic and diluted loss per share are calculated as 1.73 pence (2014: 8.33 pence loss).
8. Loans and receivables 2015 2014
GBP GBP
Opening balance 1,923,733 2,923,760
Repayment of loan (885,414) (826,220)
Impairment of loan (973,069) -
Exchange (loss)/gain on revaluation of loan (65,250) (163,807)
Closing balance - 1,933,733
--------- ---------
The loan in relation to the Riverside Resort apartments in Alanya has been impaired this year to reflect the Group's ongoing difficulties with receiving the amounts owed from Mandalina, which are related to the action being taken against the Group's former Chief Financial Officer in Turkey, see note 21 for further details.
9. Foreign currency gains 2015 2014
GBP GBP
Translation of cash balances - 44
Other foreign currency gain 2,455,587 192,219
Net currency gains 2,455,587 192,263
--------- -------
Foreign currency gains or losses on transactions and balances in the Turkish subsidiaries are recognised in the translation reserve, not in the amounts above. The Company has no accounts in any currency other than Pound Sterling. The translation of cash balances relates to the Jersey group entities, with the balances of the Turkish entities being recognised as subsidiary translation foreign exchange as part of other foreign exchange losses. The translation of cash balances noted above for the prior year relates to the translation of cash held by Ottoman Finance Company 1 Limited in Euros. The balance of this account at 31 August 2015 was nil.
10. Investment in subsidiaries - Company
Country of Authorised Issued Ownership
Name incorporation share capital share capital %
Ottoman Finance Company I Limited Jersey GBP10,000 GBP1 100
Ottoman Finance Company II Limited Jersey GBP10,000 GBP1 100
Osmanli Yapi 1 Turkey YTL 57,395,416 YTL 50,000 99.99
Osmanli Yapi 2 Turkey YTL 193,534,525 YTL 50,000 99.99
All of the above companies have been incorporated into the Group accounts.
11. Trade and other receivables
2015 2014
GBP GBP
Prepayments and accrued income 20,950 1,139,616
VAT receivable 9,171 731
Other receivables 182,378 87,287
212,499 1,227,634
------- ---------
The Directors consider that the carrying amount of the above receivables approximates to their fair value. Prepayments include advances to suppliers.
12. Trade and other payables
2015 2014
GBP GBP
Accruals 42,648 68,840
Taxation 1,188,751 -
Other payables 411,357 19,163
1,642,756 88,003
--------- ------
The Directors consider that the carrying amount of the above payables approximates to their fair value.
See notes 6 and 2(g) for further information on taxation.
13. Share capital
Authorised:
Founder shares of no par value 10
Ordinary shares of no par value Unlimited
Issued and fully paid: GBP
2 founder shares of no par value -
134,764,709 ordinary shares of no par value (2014: 134,764,709) 52,636,216
----------
The 2 founder shares of no par value are held by Vistra Nominees I Limited. These shares are not eligible for participation in the Company's investments and carry no voting rights at general meetings of the Company.
Capital Management
As a result of the Group being closed-ended, capital management is wholly determined by the Board and is not influenced by subscriptions or redemptions. The Group's objectives for managing capital are to maintain sufficient liquidity to meet the expenses of the Group as they fall due and to invest in the Group's current assets when the Board feels it will give rise to capital appreciation. As the Group has sold assets during the year, the Board decided to return excess capital to shareholders. As part of the process, the Board reviews cash flow forecasts to ensure that sufficient cash is retained to support the operations of the Group.
Movements in ordinary share capital during the year Number GBP
Ordinary shares in issue at 1 September 2014 134,764,709 84,392,980
Movement during the year - (31,756,764)
----------- -----------
Ordinary shares in issue at 31 August 2015 134,764,709 52,636,216
----------- -----------
14. Retained earnings
2015 2014
GBP GBP
At start of year (41,624,725) (30,404,134)
Bank and deposit interest earned 152,581 598,820
Profit on sale of inventory - 6,892,599
Disposal of inventory - (16,923,464)
Operating expenses (2,331,083) (1,679,533)
(2,178,502) (11,111,578)
Net movement on foreign exchange 2,455,587 192,263
Tax (2,606,868) (301,276)
----------- -----------
Loss for the year (2,329,783) (11,220,591)
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Minority interests - -
----------- -----------
At end of year (43,954,508) (41,624,725)
----------- -----------
15. Net asset value per share
The net asset value per ordinary share is based on the net assets attributable to equity shareholders of GBP5,730,382 (2014: GBP40,976,092) and on 134,764,709 ordinary shares
(2014: 134,764,709), being the number of ordinary shares in issue at the year end. The net asset value per share for the year ended 31 August 2015 was 4.3 pence (2014: 30.4 pence).
16. Cash and cash equivalents
2015 2014
GBP GBP
Bank balances 7,160,639 37,902,728
--------- ----------
17. Financial instruments
The Group's financial instruments comprise loans, cash balances, receivables and payables that arise directly from its operations, for example, in respect of receivables for accrued income.
The principal risks the Group faces from its financial instruments are:
(i) Market risk (ii) Credit risk (iii) Foreign currency risk (iv) Interest rate risk (v) Liquidity risk
As part of regular Board functions, the Board reviews each of these risks. As required by IFRS 7: Disclosure and Presentation, an analysis of financial assets and liabilities, which identifies the risk to the Group of holding such items, is given below.
(i) Market price risk
Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Group's operations. It represents the potential loss the Group might suffer through holding market positions as a consequence of price movements. Consistent with the prior year, the Group has no such exposures to market price risk.
(ii) Credit risk
Credit risk is the risk that counterparties will be unable to deliver on assets due to the Group. The largest counterparty risk is with the Group's bankers. Bankruptcy or insolvency of Deutsche Bank International Limited may cause the Group's rights with respect to cash held to be delayed or limited. There is no policy in place to mitigate this risk as the Board believes there is no need to do so, due to the likelihood of it occurring being remote.
The Group's holds a third party loan in respect of the investment in the Riverside Resort in Alanya which is potentially at risk from the failure of the third party to repay the loan. The Board considers the recovery of the loan on an ongoing basis; please refer to note 8 for further details.
The Board monitors the credit quality of receivables on an ongoing basis. Cash balances have been placed with Deutsche Bank International Limited due to its Moody's credit rating of A2.
The Group's principal financial assets are other receivables and cash and cash equivalents. The maximum exposure of the Group to credit risk is the carrying amount of each class of financial assets. Other receivables are represented mainly by prepayments, and other receivables where no significant credit risk is recognised.
Credit risk exposure
In summary, compared to the amounts in the consolidated statement of financial position, the maximum exposure to credit risk at 31 August 2015 was as follows:
Balance Maximum Balance Maximum
sheet exposure sheet exposure
at 31 August at 31 August at 31 August at 31 August
2015 2015 2014 2014
Non-current assets GBP GBP GBP GBP
Loans and receivables - - 1,933,733 1,933,733
Current assets
Cash and cash equivalents 7,160,639 7,160,639 37,902,728 37,902,728
Other receivables 212,499 212,499 1,227,634 1,227,634
------------ ------------ ------------ ------------
7,373,138 7,373,138 41,064,095 41,064,095
------------ ------------ ------------ ------------
Fair value of financial assets and liabilities
The book values of the cash at bank and loans and receivables included in these financial statements approximate to their fair values.
(iii) Foreign currency risk
The Group operates Pound Sterling, Euro, US Dollar and Turkish Lira bank accounts. Exchange gains or losses arise as a result of movements in the exchange rates between the date of a transaction denominated in a currency other than Sterling and its settlement. There is no policy in place to mitigate this risk as the Board believes such a policy would not be cost effective given the Group's exposure.
Currency rate exposure
An analysis of the Group's currency exposure in Pound Sterling is detailed below:
Currency Non-current Net monetary Liabilities at Non-current Net monetary Liabilities at
assets at 31 assets at 31 31 August 2015 assets at 31 assets at 31 31 August 2014
August 2015 August 2015 August 2014 August 2014
GBP GBP GBP GBP GBP
Pounds Sterling - 495,236 (1,538,834) - 13,053,770 (56,133)
Euro - - - 1,933,733 567 -
US Dollar - 5,146,807 - - 24,818,749 -
Turkish Lira - 88,339 (103,922) - 1,169,272 (31,870)
--------------- -------------- --------------- --------------- -------------- ---------------
- 5,730,382 (1,642,756) 1,933,733 39,042,358 (88,003)
--------------- -------------- --------------- --------------- -------------- ---------------
Foreign currency sensitivity
The table below details the Group's sensitivity to a 5% increase in the value of Sterling against the relevant currencies. This percentage is considered reasonable due to volatility in current and historic exchange rate movements. With all other variables held constant, net assets attributable to shareholders and the change in net assets attributable to shareholders per the consolidated income statement would have decreased by the amounts shown below. The analysis has been performed on the same basis as for 2014.
Currency Profit & Loss at Equity at Profit & Loss at Equity at
31 August 31 August 31 August 31 August
2015 2015 2014 2014
GBP GBP GBP GBP
Euro - - 96,715 -
US Dollar 257,340 - 1,240,937 -
Turkish Lira (779) - 56,870 -
---------------- ---------- ---------------- ----------
256,561 - 1,394,522 -
---------------- ---------- ---------------- ----------
A 5% weakening of Sterling against the relevant currency would have resulted in an equal but opposite effect on the amounts in the financial statements to the amounts shown above, on the basis that all other variables remain constant.
(iv) Interest rate risk
Interest rate movements may affect the level of income receivable on cash deposits. There is no policy in place to mitigate this risk as the Board believes such a policy would not be cost effective, given the Group's exposure.
The Group holds only cash deposits.
The interest rate profile of the Group excluding short term receivables and payables was as follows:
Currency Floating Non interest Floating Non interest
rate bearing rate bearing
at 31 August at 31 August at 31 August at 31 August
2015 2015 2014 2014
GBP GBP GBP GBP
Pounds Sterling 2,013,120 - 13,082,567 219
Euro - - - 1,934,300
US Dollar 4,473,540 673,267 24,818,749 -
Turkish Lira - 712 - 625
------------ ------------ ------------ ------------
6,486,660 673,979 37,901,316 1,935,144
------------ ------------ ------------ ------------
Maturity profile
The following table sets out the carrying amount, by maturity, of the Group's financial instruments:
2015
0 to 3 3 to 6 6 to 12 More than
months months months 1 year Total
GBP GBP GBP GBP GBP
Floating rate
Cash 6,486,660 - - - 6,486,660
--------- ------ ------- --------- ---------
6,486,660 - - - 6,486,660
--------- ------ ------- --------- ---------
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